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INDEPENDENT FINANCIAL ADVICE CENTRE
You should remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of units, and the value derived from them, to fall as well as rise and you may get back less than you invested when you decide to sell your units. The tax treatment of investments and pensions is not guaranteed and may change in the future.
Your home is at risk if you do not keep up the payments on a mortgage
WHAT ANNUITY SHOULD I HAVE
We have broken the big decision down into lots of little ones, yes/no for example. Its a bit old fashioned but write down each answer as you reach each small decision and at the end of the questions you should know which annuity you require or need further advice upon.
DELAY
If you do not have to purchase your Annuity now you could consider delaying buying it for a while. If your pension fund is left invested it could grow and thus buy you a larger Annuity.
You would also be older and normally the older you are the higher the Annuity will be. (You are not expected to live so long!) If Interest rates rise in future, you could also get a higher Annuity, as there is a close link between interest rates and Annuity rates.
BUT, Stockmarkets can fall as well as rise; Interest rates could also fall, all of which could mean you receive a lower Annuity in future. You are also missing out on the income in the meantime, so is the potential of a larger income in a few years time worth losing out on income now.
You may also need any PCLS now, to pay off loans perhaps, and you cannot take the cash without starting the Annuity (unless you have a drawdown annuity see later). However if you do not need all the cash now you could consider Phasing. (also see later)
Clearly if you are going to delay buying the annuity you need to ensure the funds are correctly invested in line with your plans so make sure you see an IFA.
• Pension Commencement Lump Sum-PCLS (TAX FREE CASH)
These days, with Annuity rates so low, if there is an option to take cash most people do. It can be worth 16 years net income in advance! Besides income everybody should have some capital available for emergencies. Imagine your fridge packing up in twenty years time, how much will a new one cost then? Nobody wants Hire Purchase payments whilst trying to live on a pension, which may not have increased for twenty years.
Increasing income from a properly invested lump sum can boost the lower Annuity you will receive. It may be possible to avoid tax on that income and it can carry on for a spouse if required. If you have no partner the Capital can pass onto the next generation or you can simply spend it!
? take the annuity Now or Defer
Annuity Purchase
